We celebrate Diwali in many manners and one of the ways which Investors and traders celebrate is by trading during this special ‘Muhurat’ period. One should consider this period just like any other, an opportunity to invest in the stock market, having a long term view.
If we look at the current stock market in India and Globally, we are witnessing high level of volatility. Domestic indices, Nifty was down by -3.7 percent. We are witnessing global economies taking aggressive monetary policy stance as means to combat inflation. This has caused further volatility and made dollar strengthen to almost a two decade high.
Post strong August’22 inflows, FII again turned negative in September’22 to the tune of ~$ 903 mn; while DII’s continued to maintain strong fund inflow and were net positive to the tune of ~$ 1.7 bn. FIIs turned net sellers again in the month of September primarily because of surge in US 10 y yields to ~ 3.9 percent levels and dollar index hitting fresh 20 year highs. The FIIs flows are expected to continue to attract short term volatility owing to the pace of rate hikes by major central banks.
With regards to equity markets, there are three major factors which drives it – fundamentals, both macro and corporate, liquidity flow towards the equity market and equity valuations. In terms of fundamentals and valuations, India is better placed then most major economies. The domestic flow towards the equity market is also supportive of a buoyant equity market. However, the global risks and the consequent foreign portfolio outflow from Indian equity market.
Looking at the current economic scenario, I believe that the current investment outlook should be strategic as opposed to product driven. One should assess at the investment objective and risk associated to the investment vehicle. There has never been such a thing as ‘Right’ time to invest.
While investing, it is the tenor or the duration of the invested portfolio that counts as opposed to the timing of the markets. Psychologically, there’s this gravitational pull around the markets, where people tend to sell when the markets are really low and then wait for the right time to invest back in, by which time the markets tend to bounce back and they miss the rally.
At this current juncture, I believe that investors should look at stock specific opportunities available across market capitalization and investors should stick to high quality companies with good earnings visibility irrespective if it from mid and small caps. With improving consumer sentiments; easing raw materials prices and green shots of economic recovery visible – we except top line earnings growth to likely be in higher double digits. Banking & Financials / Autos and Industrial Goods are expected to perform really well in Q2 FY-23.
Strong credit growth which is at decadal high of ~ 16 percent will boost the second quarter earnings for banking sector and we except asset quality to improve further due to reduction in fresh slippages. We except NII and loan growth for all major banks to be quite strong and deliver a high teen growth on year on year basis. We except BFSI sector to do really well for the next 3 to 5 years due to India’s promising economic growth outlook and under penetration of financial services in the country.
From a domestic perspective, we don’t see substantial movement from current levels given various global headwinds like global inflationary environment, geopolitical issues, and aggressive monetary policy tightening by most major central banks. We except Nifty to range bound during Diwali.
We expect the Indian equities to bounce back given the resilient economy and currency. We are witnessing consumption revival and hoping the same to continue to the current festive season which will give further boost to domestic consumption oriented sectors.
The author, Pradeep Gupta, is Co-Founder and Vice Chairman at Anand Rathi Group. The views expressed are personal
